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Why Not Allow the FASB and IASB Standards to Compete in the U.S.?

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Author Info

  • Shyam NMI Sunder

    ()
    (School of Management)

  • Ronald A. Dye

    ()
    (General)

Abstract

This paper articulates the arguments for and against introducing competition into the accounting standard-setting process in the U.S. by allowing individual corporations to issue financial reports prepared in accordance with either FASB or IASB rules. The paper examines several arguments supporting the status quo, including (1) the FASB's experience and world leadership in making accounting rules, (2) the increased risk of a "race to the bottom" under regulatory competition, (3) the inability of most users of financial reports to understand the complex technical issues underlying accounting standards, (4) the possibility that IASB's standards will be diluted to gain international acceptance, allowing additional opportunities for earnings management, (5) the risks of the IASB being deadlocked or captured by interests hostile to business, (6) the costs of experimentation in standard-setting, and (7) economies from network externalities. Argument examined on the other side include how competition will (1) help meet the needs of globalized businesses, (2) increase the likelihood that the accounting standards will be efficient, (3) help protect standard-setters from undue pressure from interest groups, (4) allow different standards to develop for different corporate clienteles, (5) allow corporations to send more informative signals through their choice among accounting standards, (6) protect corporations against capture of regulatory body by narrow interests, and (7) not affect network externalities at national or global scales.

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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm192.

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Date of creation: 31 May 2001
Date of revision:
Handle: RePEc:ysm:somwrk:ysm192

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Web page: http://icf.som.yale.edu/
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Related research

Keywords: Accounting Standards; Regulatory Competition; International;

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Cited by:
  1. Shyam Sunder, 2007. "Accounting: Labor, Capital and Product Markets," Yale School of Management Working Papers ysm403, Yale School of Management.
  2. Beyer, Anne & Cohen, Daniel A. & Lys, Thomas Z. & Walther, Beverly R., 2010. "The financial reporting environment: Review of the recent literature," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 296-343, December.
  3. Shyam Sunder, 2005. "Social Norms versus Standards of Accounting," Yale School of Management Working Papers amz2525, Yale School of Management, revised 01 Sep 2005.
  4. Dichev, Ilia D. & Graham, John R. & Harvey, Campbell R. & Rajgopal, Shiva, 2013. "Earnings quality: Evidence from the field," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 1-33.
  5. Sunder, Shyam, 2002. "Regulatory competition among accounting standards within and across international boundaries," Journal of Accounting and Public Policy, Elsevier, vol. 21(3), pages 219-234.
  6. Shyam Sunder, 2003. "Rethinking the Structure of Accounting and Auditing," Yale School of Management Working Papers ysm382, Yale School of Management.
  7. Shyam NMI Sunder & Karim Jamal & Michael S. Maier, 2002. "Privacy in E-Commerce: Development of Reporting Standards, Disclosure and Assurance Services in an Unregulated Market," Yale School of Management Working Papers ysm285, Yale School of Management.
  8. Shyam Sunder & Karim Jamal, 2006. "Regulation, Competition and Independence in a Certification Society: Financial Reports Vs. Baseball Cards," Yale School of Management Working Papers amz2578, Yale School of Management, revised 01 Jun 2007.
  9. Satoshi Taguchi & Masayuki Ueeda & Kazunori Miwa & Satoru Mizutani, 2013. "Economic Consequences of Global Accounting Convergence: An Experimental Study," The Japanese Accounting Review, Research Institute for Economics & Business Administration, Kobe University, vol. 3, pages 103-120, December.
  10. Shizuki Saito, 2011. "Accounting Standards and Global Convergence Revisited: Social Norms and Economic Concepts," The Japanese Accounting Review, Research Institute for Economics & Business Administration, Kobe University, vol. 1, pages 105-117, December.
  11. Roland Königsgruber, 2010. "A political economy of accounting standard setting," Journal of Management and Governance, Springer, vol. 14(4), pages 277-295, November.
  12. Jordi Perramon & Oriol Amat, 2006. "IFRS introduction and its effect on listed companies in Spain," Economics Working Papers 975, Department of Economics and Business, Universitat Pompeu Fabra.
  13. Shyam Sunder, 2001. "Standards for Corporate Financial Reporting: Regulatory Competition Within and Across International Boundaries," Yale School of Management Working Papers ysm245, Yale School of Management, revised 01 Apr 2002.
  14. Kothari, S.P. & Ramanna, Karthik & Skinner, Douglas J., 2010. "Implications for GAAP from an analysis of positive research in accounting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 246-286, December.

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